The Indicators Aotearoa public consultation

Statistics New Zealand is asking for public consultation on Indicators Aotearoa New Zealand, a consultation motivated here.

Now given my own writing on the usefulness of GDP and my concern about injustice rhetoric being used for consumption instead of facing issues that matter I would be expected to have an opinion.

Sure I do, it makes sense to ask people what outcomes they care about in order to determine what we measure and what prominence it has.  So this is very cool to see – and I’d be keen for everyone to get involved in saying what matters to them.  Let’s see what they say:

“These indicators will be designed to be independent and to paint an enduring picture of how New Zealand is tracking, and will help underpin robust decision-making for years to come,” says Ms MacPherson.

“But to shape the measures which will be included in Indicators Aotearoa New Zealand, we need your help.

“That’s why Stats NZ wants to hear from you about what you’d like to see represented in the set of indicators. You might want to see measures about the state of our health, our environment, our infrastructure, or our social connections.”

Where we have a picture we can model trade-offs, when we can discuss trade-offs between competing factors that people care about we can discuss policy.  This is useful as long as we don’t get lazy on the modelling trade-offs part of course 😉

They state that you can give a submission at the link above or email indicators@stats.govt.nz.  So why not give that a go.  I’ll be sure to think about the broad social issues that matter to me and send in my own submission at some point myself.  Neither of the links say how long we have to do this so we better be quick – quick but thoughtful of course 😉

Monopsony in the NZ labour market?

As part of catching up with what has been happening in New Zealand I am reading what I can find from New Zealand economists.  In doing so I wandered onto this piece by Shamubeel Eaqub of Sense Partners.

Firms are finding it hard to recruit, as the pool of qualified job seekers who are not already employed is so small. … (But) Wages haven’t risen in tandem. Wages have been increasing in some sectors like construction, but have been stagnant in others. … One explanation for this may be a lack of competition in a local labour market.

The increase is from a low level and evidence from the US on minimum wages suggest such increases don’t cost jobs, but improve the incomes for the working poor.

So there are two claims embedded in this that I want to think about a bit here: Competition through monopsony and the efficacy of a higher minimum wage in the NZ context.

Is there suggestive signs of monopsony in NZ’s labour market (Tl;dr is YES and NO), does this imply minimum wages could increase employment (Tl;dr is YES if monopsony holds), does this suggest higher minimum wages would increase, or at least not reduce, employment (Tl;dr is probably NO at current levels).  Although we will be going through a bit more than this in what has turned into a long post.  Let’s do this.

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An example of misusing data/GDP/aggregates

What a perfect chance to rant after describing thinking about GDP this morning!  The econ news gods love to provide.

Look, I didn’t really agree with the Business New Zealand piece on New Zealand not being a “low wage” economy either – although I’d like people to be a bit clearer with their definition before they call anything low wage – but what the hell is this sort of article by a “data scientist”. [Note: I like data science and data scientists.  This is not an example of that.]

Now I’m back I’m calling this sort of trash “economics reporting” out – if we are going to publish articles where we are giving an objective rundown of the data we have to know the data and know the research at a basic level.

If we want to state our values (eg there are have nots in New Zealand that we want to support more) we don’t need to do this, we should all be allowed to state what we think matters and doesn’t matter.  But abusing the data and misstating trade-offs isn’t doing that, it is straight lace lying mate – irrespective of whether we disagree with the values associated with the person we are disagreeing with.

Reading it half a dozen times I think I’ve worked out what he is attempting to say.  Real GDP in NZ is probably between 15% and 30% lower in New Zealand than Aussie.  After tax wages are about 32% lower according to a measure they aren’t going to cite, because Stuff.co.nz has no shame about what it does with data (Note: It is probably the OECD disposable income measures).  Therefore wages can go up by increasing the share of income going to labour and we don’t need productivity growth.  Ignore the logical incoherence of that conclusion for now, the very premise of it is flawed to hell.  Let me explain.

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Scope of blog posts – question everything

Proper posting starts next week but before we start I just want to outline the broad scope, but narrow method, of the posting that will occur here – and hopefully the critical comments of other people will follow the same idea when discussing these things.  Essentially let’s cover all sorts of social and economic issues based on two factors: questioning and understanding the context of the received wisdom that underlies them.  In this way, each post should start with an idea that some group accepts as true, and needs to both critique that but also understand the underlying concern or situation that led to that idea gaining traction.

Coming back to reading the news of the day I’m struck by how much “received wisdom” there is out there.  I know I used to complain about it and state that economists should be careful about how their simplifications could be taken as received wisdom, but to be honest I’d forgotten quite how extreme it is.

Now this may be all well and good but it isn’t how I like to think about economic and social issues.  Instead I like the idea that a good way to look at these questions is to be a bit of a child:

A good economist is like a petulant child.  They always ask why, never fully accept an answer, and rarely fully reject one.

All of us sitting here on our computers intend to be good economists, and this blog is a space where we can practice the art – asking ourselves whether the received wisdom we rely on to reach our conclusions about certain social and economic policies is really defensible.  But critique alone isn’t as useful as I used to think – we also need to ask why the received wisdom is accepted in order to understand where legitimate concerns regarding trade-offs exist.

I have noticed discussion of New Zealand’s “poor productivity performance” (among other things) here.

I have noticed the statement that people now are worse off than their parents (here and here).

I keep hearing that wages aren’t going up in New Zealand – a statement I find particularly surprisingly given that I have been sitting around in a dark room with the evidence of rising wages for several years.

Now each of these statements comes from something.  Productivity, the progress of generations, and wage growth are all short hand things that are used to define progress (assuming of course no trade-off) and a belief in their absence indicates that individuals in society are concerned about social and economic failure.

However, to a particular group each of these is a received wisdom that can be dropped in conversation.  The economist or policy analyst will use the first to signal to other economists that they know what productivity is.  The married couple in their 30s or 40s will use the second to talk to their parents over brunch about how they don’t understand how much harder it is for them than it was for the baby boomers.  The third is used by people the whole economy over to complain about how they should be paid more for the day they spend surfing facebook and commenting on stuff articles.

My cynicism aside, each of these pieces of received wisdom both includes true information in the context it was noted – and misleading information that is being used to support a set of beliefs for some group.

Take wage growth as an example.  During the Global Financial Crisis there was evidence wage growth was weak – in fact there are periods where wage growth will slow which demand explanation (including during 2017).  However, this is not evidence that wages are always and everywhere too low.  Real wages in New Zealand have grown persistently through time … if this is contentious to someone then don’t worry, this will be covered eventually.

Going forward lets evaluate some of these ideas on the blog.  We can try to figure out the context where they are useful – and the context where they are misapplied.  Uncomfortable statements for this wisdom such as “if lower productivity is a choice is it really bad” and “millennials in NZ are fundamentally wealthier in terms of goods and services than baby boomers were” can be placed alongside the nuggets of truth such as “lower productivity due to some group protecting themselves (poor competition) is a failure” and “many millennials are excluded from some things, such as access to the security of owning a house, that baby boomers weren’t”.

Received wisdom is there for a reason – and we should be keen to find out what people may be concerned about rather than ignoring it.  However, this does not mean that we should take received wisdom as given – since out of context it is often simply false statements used by a group to try to get something.

Lets do this.

Top 10

On Friday I gave interest.co.nz a Top 10 which, in a sense, considered trade, immigration, and social policy – at least in terms of some of the principles we used to discuss trade-offs.  Go over and give it a crack 😉

Future of work?

While I have been buried in literature regarding New Zealand’s policy past I have not been paying too much attention to what politicians within New Zealand have been saying.  This has led me to miss the growth in xenophobia in New Zealand – with the suggestion of putting a levy on “foreign workers” now being seen as sensible policy by the Labour party.  This disappoints me greatly, and I am genuinely hurt that society is moving this way over here.

Although growing xenophobia in New Zealand and around the world disappoints me, I struggle to believe it is the result of a truly racist preference.  Instead the growth of, or at very least the perception of, economic insecurity is undermining principles of tolerance.  In that way there is a role for government to improve outcomes – not by attacking other groups – but through its role as the provider of social insurance.

It is in this way that the Labour party’s willingness to discuss the Future of Work is encouraging.  A lack of economic security, both in terms of income and perceptions of status, is one of the key reasons why society coordinates insurance policy through a central government – the scope and nature of this needs to be discussed and evaluated as the world changes.

And in this way the recent NBR piece by Rodney Hide that was approving linked to by David Farrar makes no sense to me.  I don’t disagree that politicians use empty rhetoric – Hide as a former politician has plenty of experience doing that himself.  In fact the article is filled with its own meaningless slogans about wealth generators and needing to be an experienced businessman to discuss industry.

There is a meaningful debate to be had about the nature of social insurance in New Zealand, and the way we help people transition between jobs in the face of technological changes and other changes in the global economic environment.  This is a debate that we ignored in the 1980s and early 1990s which has undeniably hurt certain groups in society.  This is a debate that has been ignored in the UK and US and has led to the election of increasingly authoritarian governments pushing increasingly intolerant policies that the majority feels will give them the security they lack in the labour market.

Morally I have long felt that the Western middle class (myself included) should accept the idea of slower growth in living standards to reduce global poverty – although premised on the idea that there should be more domestic support to helping those who lose from any change to transiton.  But recent elections around the world show they haven’t, and the status costs associated with these changes (and growth in income to the wealthiest in these countries) has led to a backlash.  Not just that, but the changes have occurred in a way that has – for many – undermined economic security.

This is a relevant issue for policy makers and the public to discuss, and making sure we talk about these so that the trade-offs involved are transparent and the value-judgments we are making as a society are clear is essential.  Attacking policy suggestions on the basis that the report is too big and you don’t know what the programs are – like Hide does – doesn’t help.